July 26, 2011

The Truth Comes Out in Honduras By MARY ANASTASIA O'GRADY JULY 25, 2011

A commission established by the Organization of American States shows that Manuel Zelaya precipitated the crisis that led to his ouster.

The Honduran Supreme Court's order to arrest then-president Manuel Zelaya and the military's decision to deport him to Costa Rica in June of 2009 was a blow to international socialism.

Mr. Zelaya had been flagrantly violating constitutional law by trying to prolong his tenure. But his friends—the Castro brothers and Hugo Chávez and their acolytes—called his arrest a right-wing military coup. As the left often does when it loses a bid for power through violence, they demanded a "truth commission," so they could trot out "witnesses" to the injustices they claimed had taken place in Honduras.

A truth commission established under the auspices of the Organization of American States (OAS) released its report earlier this month. But the zelayistas didn't quite get the condemnation they sought. Instead, the report is a solid indictment of the former president as the provocateur of the crisis and a corrupt head of state. Given the intense international pressure to produce something that would save face for Zelaya backers, this can mean only one thing: The evidence against him was overwhelming.....

Mary O'Grady admits that she didn't read the entire report, which weighs in at some 1,800 pages. I have read parts, including the corruption part and she's right: Their evidence against Zelaya and Enrique Lanza Flores (who has been crying 'political persecution') is damning. By the way, much of what was included in the official report (they only gave examples) was reported in this blog in 2009.

I've uploaded a copy of the Truth Commission Report to Scribd (in nine parts plus a summary of recommendations) if anyone is looking for some bedtime reading.

Hat tip to Ed for sending me the WSJ article and finding the other link for me.

July 25, 2011

Should I move my money to the US? Should I divide up my money among different banks? How is the new fluctuating lempira exchange rate going to affect me? Should I keep my money in dollars or lempiras? Should I just put it under the mattress? Those are hot topics in Honduras right now.

New Security Tax

The Congress has passed a controversial new security tax law which will impose a 0.3% (.003) tax on all bank debits (withdrawals, transfers, payments, etc. from your accounts) if your average monthly balances in that bank are more than L.120,000 or US $6,000, the rough equivalent in US dollars. I'm greatly simplifying this, but for purposes of a non-business owner expatriate who meets the threshold, basically when your money leaves that particular bank, whether by cash or ATM withdrawal, check, or wire transfer, it will be taxed. Transferring money to another person's or business' account within the same bank will also trigger the tax.

Additionally, there is no threshold balance for checking accounts — all checks will be taxed to the payer. This won't have a significant affect on individuals as no one wants to take a check in Honduras anyway! Cash, intra-bank transfers, debit cards, and ACH transfers are much more commonly used. Businesses will likely be much more affected by this. The law includes 20 specific exonerations, including for churches and international humanitarian organizations. Additionally, payment of taxes is not taxed, nor are transfers between the same person's accounts within one bank, though transfers to one's own account at another bank would be. There is an exception for "transferencias" of less than L.10,000 by persons, which could be interpreted as many types of transactions since the law itself uses that word in describing four of the six taxable transactions.

There is a lot that can be said about the law, about the fairness of it, and about the need for improved security in Honduras, as well as the many serious doubts that the money resulting from this tax will be used effectively. But all that is for another time. The tax is law now and there is nothing we can do about it except to hope and pray that the estimated L. 7.5 billion generated for security funds will show some results and not too much of it will be squandered by corruption and incompetence.

How will this affect me personally?

My personal opinion is that there has been much overreaction with people talking about moving their money outside of the country and/or keeping accounts at different banks with balances less than L.130,000. Nobody likes paying more taxes, but we need to look at the whole picture to realize the effect on your personal finances: interest rates in Honduras are hugely higher than in the US. Hugely!

To use a simple example in dollars, let's say that you are a retiree who receives US $2,000 a month from your pension and that you spend the entire US $2,000 every month. Let's also say that you have a nest egg of your entire lifetime savings of $50,000, which puts your Honduran bank accounts over the tax threshold.

The interest factor

If the retiree keeps an average one month cushion (about $2,000) in his Honduras account, whether it is in dollars or lempiras, the interest earned on his account will be slightly higher in Honduras than it would have been in the US, but not significantly, so we'll ignore that for this example to continue in the conservative vein.

Interest on the $50,000 is a whole different matter.

Example A: If you keep your $50,000 savings in the US, currently you'll earn about $125 annually in interest (at 0.25%), maybe as much as $375 (at 0.75%) if you have it in a long term CD. Let's use $250 for this example.

Example B: If you keep your $50,000 savings in US dollars in Honduras, you'll earn about $500 in interest (at 1.00%).

Example C: If you keep your $50,000 in lempiras, you'll earn the equivalent of about US $2,500 in interest annually (at a conservative estimated 5% interest rate).

Doing the math

In all three examples, the taxpayer is spending $24,000 per year, but in Example A, since his balance in Honduras never exceeds the threshold, he would not pay the security tax.

In Honduras, the banks automatically deduct a 10% income tax on interest. In the US, I believe the minimum tax rate is 10%, but to keep it simple for these examples, let's assume that the retiree's net income after deductions and exemptions doesn't meet the minimum income levels for paying US taxes.

So here is what we would have at the end of the year:

Example

Interestearned

IncomeTax

SecurityTax on $24k

NetEarnings

A

$250

0

0

$250

B

$500

$50

$72

$378

C

$2,500

$250

$72

$2,178

Pretty striking difference, no?

Now let's assume that the retiree is going to take his nest egg and buy a house, car, or a business, or just spend it on normal living expenses over time. To move that money from the US would probably require one or more wire transfer fees of at least $15, maybe more, plus once he spent the money in Honduras, whether it is in one lump sum or dribbled out monthly over time, it would be subject to the security tax in all three examples until his total average balance drops below $6,000.

Example

Earningsfrom above

WireFees

SecurityTax on $50k

NetEarnings

A

$250

$15

$150

$85

B

$378

0

$150

$228

C

$2,178

0

$150

$2,028

My conclusions

Everyone's personal finances are different but it seems very clear to me that the net income earned in Honduras makes it well worth while to keep your money here. And the more money you have, the more significant the difference in your favor is going to be. Shopping around for interest rates can easily result in much better rates than the ones I've used in these examples. Based on rate quotes I recently received, you could earn 7.5% on a 3-month lempira CD compared to 0.25% to 0.75% listed at Charles Schwab right now!

Also, if you split that $50,000 into different banks to avoid the security tax, it will take a minimum of 9 different bank accounts! Dealing with one bank is usually hard enough. The hassle factor of dealing with nine banks is incomprehensible to me. Additionally, the lower balance (under $6,000 or L. 130,000) is going to cost you as much as 1% in lower interest on a lempira account (about $500).

And right about now, you are probably asking yourself, "Can I open a Honduran bank account and earn those great interest rates?". Unfortunately, most Honduran banks will open accounts only for Honduran citizens, legal foreign residents, and legally established businesses in Honduras. There have been exceptions, but money laundering and US pressure after 911 are to thank for the change.

To be continued...

Ah! But now there is a new factor to consider. Not only do we have this new tax but we have the new risk of devaluation of the lempira.

Since this article has become so long, I will continue the discussion in Part 2. Thanks go to Angel for his input on this article and for sending me a copy of the law.

What do you think about this analysis? Have I missed something? Can you add any insight? Can you think of a different example that would give a different bottom line?

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Commenting: I have a bug issue with the comments link that I'm trying to resolve. To see the comments or add one, click on the number before the "comments" image with the down arrow. If you are using Internet Explorer and that number link is not appearing, click on 'Go to top' and then click on the article title to go to the comment page. I'm so sorry for the inconvenience.

July 23, 2011

Since the Blogicito couldn't take the author out to dinner to celebrate, La Gringa's Blogicito is celebrating the five year mark with a much-needed facelift. I hope you like it, because I've been working long and very hard on it.

If you are reading this article from a RSS feed or email, please, please, please come and take a look at the new look! I'm not a techie so everything was done through trial and error on a test blog first ... much trial and much, much error.

I still can't believe that I've been blogging for 5 years! With about 1,400 articles, 14,000+ comments, and almost 1,400 readers, technically the 'Blogicito' (little blog) should now be called the 'Blogisote' (big blog). Hahaha. Finding something in the blog has become more and more difficult owing to the sheer volume of articles. My next blog project will be to investigate and figure out a way to make that process more manageable for new readers who want to explore to be able to focus on the best articles.

Special thanks to Readers

A blog is nothing much without readers. Mil gracias (a thousand thanks) go to all you loyal readers who have made the journey with me, to all the new readers who have joined along the way, and especially to those of you who participate with me in the blog by commenting, sending tips, or suggesting topics. No blogger would have made it this long without readers who encourage and inspire. The only reason to blog is so that someone will read it — otherwise it would be called a diary, right?

A million thanks go to my #1 reader, El Jefe, for his patience and understanding, and most of all for helping me to understand "the Honduran way".

I had to close the Blogicito to the public during the transition and debugging process which, thanks to my lack of technical abilities, ended up taking three days instead of one night like I planned. To all those who wrote to me thinking they had been kicked out of the blog, my deepest apologies! I don't know why I didn't think to warn in advance, but I just wanted it to be a surprise.

The future

Now that the time-consuming face-lift is done — assuming you all don't tell me about a million errors — I am making a commitment to you to recommence blogging more regularly with more "everyday living in Honduras" topics. In the many months after June 28, 2009, I really burned myself out and for one reason or another, it has been very hard to get back into the groove. Regular, consistant blogging, like any other good habit, is hard to get back into when you've "fallen off the wagon." :-)

Navigation

I hope that you noticed the fancy new bamboo menu at the top. Man, what a coding and artwork project that was! Even if you are a long-time reader, please explore the new pages in the menu, in particular the new Immigrating and FAQs sections. At the bottom of the page is an automated list of the all-time most popular articles (according to Blogger.com). It is an electic list!

As soon as I get my draft back from the attorneys and revised, I will be posting a very complete Residency page which will give reliable answers to all of your Honduras residency questions.

Probably of less interest is that I've also added Disclosure, Privacy, and Comment policies which you can reach from the small menu at the bottom of the page, but the policies are there for anyone who wants to read them.

Feedback

Please let me know how you like the new look, but it is one of those trick questions like, "Does this dress make me look fat?" The blog style is based on my personal preferences. I like color and the green leaves! The leaves are the Blogicito's trademark so they won't be going anywhere.

I have researched and made some changes to try to make the Blogicito load faster but unfortunately some of those recommendations are beyond my control because they are hard-coded into Google's blogger system. Google seems to have a "do as I say, not as I do" policy — some of their 'no-no's' for website owners that cause slowness are the very things that Blogger.com (owned by Google) does.

I still have a few items on my to-do list that may help the load speed a little and a few little errors to fix. Also, keep in mind that the first time you visit, a new website will always take longer to load on your computer. Once your browser has it in the cache, it should load faster — at least that is how most browsers work.

If you notice something amiss, a widget or link not working, or get an error message on your browser, please send me an email and I'll look into it. I've tested the Blogicito on the most current versions of Firefox, Chrome, and the dreaded, unpredictable Internet Explorer. Google has put some automated mobile user codes in my template, but I have no idea how well that is working for readers. If you use a mobile device to read the Blogicito, please comment.

Don't get me started on that. Internet Explorer drives me absolutely nuts! If you use IE and are getting error messages, you might try putting my specific blog address as a "trusted site" in your privacy and security advanced settings. To do that you may have to change the setting to allow 'http' addresses as well as 'https'. Don't change your settings globally as that isn't a good idea. Also, I was able to view the site without using IE's "broken page" button, which actually messed up some things when used. If you know more about IE and have any tips for other readers, please leave a comment.

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Cheers! And here is to five more!

P.S. Click on the number below to see the comments or leave one. I'm working on trying to get that comment image to link. Sorry about that.

July 10, 2011

I was washing dishes when I saw something move out of the corner of my eye. Taking a closer look at the stack of dishes to be done, I discovered this teeny-tiny little gecko about 1 1/2 inches long.

He kind of reminded me of a tadpole. I put that one-inch key ring in the dish to give you an idea of his size. I tried to shoo him away but all he would do is run from one end of the dish to another. Okay, fine, Mr. Gecko. Take your time. I'll finish the dishes later. (Good excuse, huh?)

Geckos are a good thing in the tropics. As I've learned from my friend Steve, seven geckos were introduced to Honduras in the La Lima area outside of San Pedro in 1978 by Dr. Gene Ostmark, a scientist who was famous for his work in developing different varieties of bananas. Geckos have since spread over much of the country. Geckos eat bugs, flies, and mosquitoes, not groceries, and do no harm. They don't bother people or pets and aren't too messy.

They sometimes make a clicking sound, but at night, they make an incredibly loud-for-their-size noise, described a chirping call, which Wikipedia says is a mating call from the female. It is so loud that it can be scary the first time you hear it if you don't know what it is, but like trains or crowing roosters, after a while you don't even hear it. At the size of this one, which I would guess is only a day or two old, they are very delicate, so I didn't want to try to pick him up and risk squishing him.

I came back a few hours later to finish the dishes and he was still there in the same dish. Enough is enough, Mr. Gecko, I want to wash the dishes! I tried to shoo him over the edge with my finger. I swear that I didn't touch him. He would run from my finger so I was just trying to get him to run up and over the edge of the dish.

But apparently out of fear, he lost his tail! Some lizards do that when they are trapped or feel threatened. I didn't know what happened at first. I saw another movement in the dish and thought that there were two geckos. When I looked closer, I saw that it was his tail and it continued to wag for a couple of minutes!

He had claimed his territory and wasn't leaving. Finally I took the dish to another room and turned it on its side so that he could run out on the table, where, although embarrassed and now only about one inch long, he posed for another — tailless — photo for me.

Welcome to my Blogicito — spanglish for 'little blog'. I am a US expatriate who has been living here in La Ceiba, Honduras, with my Catracho husband since 2001 and blogging about Honduras and my expatriate life since 2006.

The Blogicito includes a wide variety of topics from everyday life to cultural differences to Honduran politics and corruption. One way to find what you are looking for is to browse the 'Topics' list or the monthly lists of articles under 'La Gringa's archives' below. Looking for something more specific? Use the search box at the upper left (for complete articles) or the Google blog search below (for a list of summaries — usually more manageable).

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